7th Pay Commission: DA At 53% Raises Concern Of Merger With Basic Pay

The Centre has increased the dearness allowance (DA) for central government employees and the dearness relief (DR) for pensioners by 3 per cent for the period July-December 2024. With this modification, the DA and DR have reached 53 per cent of the basic wage, fuelling rumours that the government may combine the DA and the basic income.  

This hypothesis is based on a similar situation that arose in 2004, when DA was combined with basic pay after reaching the 50 per cent threshold. A senior government official recently said that during the 5th Pay Commission, DA was combined into the basic since the consumer price index had increased by 50 per cent over the previous pay commission’s base index. 

However, the 6th Pay Commission took a clear stance against merging DA with basic pay, even if it crossed the 50 per cent mark. Despite the allowance surpassing the 50 per cent threshold, the Commission firmly recommended that DA should remain separate from the basic salary. This position was maintained throughout the 6th Pay Commission’s recommendations, emphasising that the DA should continue to be treated as a separate component, primarily designed to offset the impact of inflation. 

Now, despite exceeding the 50 per cent threshold, the administration has insisted that DA would not be combined with basic pay. 

When Will The Next DA Hike Be Announced? 

The next DA hike for central government employees will be announced in March 2025, shortly before the Holi holiday. However, the increase will be implemented in January 2024.  

The government reviews DA and DR for both employees and pensioners twice a year: once in March and again in September or October. These changes are applied between January and July, and employees normally get their pay in April and October, which also includes arrears for the previous two or three months. 
 

How Is DA Calculated For Central Government Employees? 

The DA for central government employees is determined using the following formula: 
 
DA% = [(Average of AICPI during the previous 12 months - 115.76) / 115.76] x 100**. 
 
AICPI is an abbreviation for the **All-India Consumer Price Index** (base year 2001 = 100).  

How Is DA Calculated For Public Sector Employees?

The calculating formula for personnel in the public sector differs somewhat. 
 
DA% = [(Average of AICPI for the previous three months - 126.33) / 126.33] x 100**. 
 
In both the situations, the AICPI indicates the inflation rate and is used to modify the DA so that employees can keep up with the cost of living. 

Conclusion 

The hike in DA for central government employees is crucial for maintaining inflation-adjusted salaries.  

The DA revision, set for March 2024, could spark speculation about a possible merger with basic pay. However, the 6th Pay Commission did not merge DA with basic pay.